In a revealing turn of events at a US antitrust trial, Google’s internal discussions about its advertising fees and competitive strategies have come to light. The trial, which began this week, sees the US Justice Department and state attorneys general accusing Google of monopolising the online advertising market.
Former Google executives testified on Tuesday and Wednesday about the company’s approach to pricing and competitive technologies.
According to former Google VP Eisar Lipkovitz, who worked on display and video ads from 2014 to 2019, Google had debated lowering the fees it charges for its ad exchange, AdX. Despite considering a reduction, the company never adjusted its 20% fee, which some internal discussions suggested could have been cut to 10-15%. The high Adx fees led websites to adopt header bidding, reports Bloomberg.
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Header bidding allows websites to auction ad space to multiple exchanges simultaneously, potentially increasing revenue. Google saw header bidding as a significant long-term threat because it could divert business away from AdX.
The trial also highlighted the experience of Jay Friedman, CEO of Goodway Group, a marketing company. Friedman recounted that while he could negotiate lower rates with other ad exchanges, Google was not willing to lower its rates. He noted that despite considering alternatives, the lack of sufficient ad supply from other exchanges kept Goodway Group tied to Google.
Stephanie Layser, a former News Corp. executive, testified that header bidding had significantly increased publisher revenues by up to 50%. In contrast, Google dismissed ads sold through header bidding as lower quality, potentially impacted by spam and fraud.
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Brad Bender, Google’s former VP of product for display and video ads, provided further insight into Google’s strategic approach. He discussed an email he sent to the display ads team that included notes from former DoubleClick CEO David Rosenblatt. The notes emphasised using Google’s ad server, DoubleClick for Publishers (DFP), to create high switching costs for clients, effectively locking them into Google’s ecosystem.
As the trial continues, these revelations paint a picture of Google’s strategic moves to maintain its dominance in the online advertising space, raising important questions about competition and market fairness.